HomeOpinionWhy local firms prefer the rand

Why local firms prefer the rand

SOUTH Africa maybe be lamenting its misfortunes owing to its currency’s continued depreciation, but companies in Zimbabwe prefer the rand, saying it is a case of better the devil they know than the United States dollar.

Memory Mataranyika

Zimbabwe uses a multi-currency regime anchored by the greenback although other currencies such as the pound, rand, pula and yen among others are also accepted as legal tender.

But the country, formerly the region’s breadbasket, has seen its economy sink into deflation, with fortunes worsened by job losses, company closures and subdued state revenue collections.

Econet Wireless chief executive officer Douglas Mboweni has called on the government to consider adopting the rand, as the current multi-currency regime hedged around the dollar is a “double-edged sword” for the country.
Companies in Zimbabwe have complained of ballooning costs, while revenues have taken a knock from declining disposable incomes.

Zimbabwean companies’ preference for the rand is in contrast to the currency’s value against the US dollar.
The rand briefly fell to its lowest recorded level of R14,07 per US dollar on August 16 night and steadied ou
t at R13,20 per US dollar the following day, fuelled by negative sentiment over the stability of China’s economy.
“In Zimbabwe, we need to remember that the US dollar is a double-edged sword for this country. We should really consider quoting for goods in rands, even when paying in dollars — it could help ease our liquidity situation,” Mboweni said.

Fears that China’s economy, also a major trading partner for Zimbabwe, is in trouble after it devalued the yuan by as much as 4,4%, has also affected other global economies.

Asian and other global stocks declined last week as the effects of China’s devaluation set in.

Mboweni said Econet Wireless had resisted the urge to dismiss workers on three months’ notice and without terminal benefits after a court ruling which saw over 20 000 employees in Zimbabwe lose their jobs, according to the Zimbabwe Congress of Trade Unions.

However, reports say Econet Wireless has terminated jobs for some of its employees. The company is owned by millionaire telecoms magnate Strive Masiyiwa.

Retailers in Zimbabwe have now been forced to slash prices to improve sales volumes, while other operators said profit margins have also taken a knock.

President Robert Mugabe, whose government’s policies are blamed for the country’s worsening economic situation, was due to delivered a state of the nation address on August 18 afternoon although experts cautioned that only austerity measures could rescue the ailing economy.

Meanwhile, latest news from South Africa indicates that government bonds edged higher on Wednesday and the rand was on a slightly firmer footing against the US dollar after a flare-up in risk aversion pushed it to a week’s low in the previous session.

The blue-chip Top 40 stock index was up 1,44% at the start of trade, while the all-share index gained 1,42%.
In fixed income, the yield for the benchmark instrument maturing in 2026 fell 3,5 basis points to 8,405%.

The rand was changing hands at R13,408 per US dollar on Wednesday morning trade, a 0,22% gain over the previous day’s close.

Traders said the rand could come under renewed pressure as recent economic data pointed to a slowdown both at home and in China, a key importer of South African commodities.

The economy contracted in the second quarter of 2015 and a report from the Trade and Industry Department showed new vehicle sales contracted 8,2% in August, the latest sign of continued stress.

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